Ask Uncle Bill

The Law of Unintended Consequences

The path to hell is paved with good intentions.  I certainly prefer a clean earth and our new house will include such energy savers as foam insulation, super efficient windows, solar water heaters and high efficiency HVAC units.  But all this talk about global warming makes me a bit nervous because of the law of unintended consequences.  Wanting to do something good often results in making matters worse.  So far, things seem on track and nothing too wacky.  I breathed a sigh of relief when Al Gore received his Oscar and the little pithy homily on energy savings ran behind him and Leo on the screen. Ok, lower your thermostat, buy energy efficient appliances, take shorter showers, and so on.  Nothing about the police impounding your SUV or living in caves.  Not yet, anyway.  Note: the thing about shorter showers kind of begs the question.  If you really want to save energy, don't take showers but there goes the law of unintended consequences.

We have already had a bit of an enviromental mess with the law of unintended consequences.  A few years ago somebody came up with the idea of putting MTBEs in gasoline to make the air 'cleaner.'  It may have made the air cleaner but it seeped into the water supply and may cause cancer.  Not a good idea.

George Will found another example which shows the law is nothing new.  Anybody remember the Dust Bowl?  It was not a football game but a storm that ripped up parts of Texas, Oklahoma, Kansas, Colorado and some other places.  A huge environmental nightmare.  If you want to read about it, check out Grapes of Wrath by John Steinbeck. 

I always thought it was a freak of nature.  It was not.  It was man made.  Here's the background--seems the Turks cut off the Russian shipping in World War I which stopped Russian wheat from reaching Europe.  That made US wheat even more valuable and the US government furthered the madness by guaranteeing a price to farmers of $2 a bushel, more than twice the normal price.  A wheat bubble ensued.  After the war, the government took back the subsidy and the farmers upped capacity even more to make up the drop in prices which is opposite of what you should do--when demand drops, reduce supply.  The farmers went the other direction and by the 1930s the farmers had added 5.2 million acres of new wheat fields to the previous 20 million acres, a pretty big increase.

So what?  Here's what.  The land is now plowed which means the grass holding down the dirt is no longer there.  The dirt is exposed.  A series of wind storms over a few years picked up the dirt starting in Texas and dumped it in Chicago and points east ending in New York and Washington where it blackened the skies and infiltrated the buildings leaving dust everywhere.  It caused an illness termed 'dust pneumonia.'  Millions of people picked up and relocated, unable to farm because there was no topsoil to grow crops. 

Eventually it rained and the grasses grew back and the earth healed itself but the whole thing would have been avoided if somebody in Washington had refrained from 'doing good.'

Doing good is good but before you do something good try to determine if it could do something bad in the long run.

Taking Away The PunchBowl--Why The Stock Market Could Go Down "Big Time"

Just when things start going good somebody wants to spoil the party.  Nothing out there right now to torpedo the market but a couple of events that could mess things up around 2010 or 2011.  Who cares?--that is light years away, you say.

True enough but the market is a discounter of future events.  The market deals with events before they happen.   

The first thing that could bode badly for stocks is one of the things driving stocks up right now--the private equity market.  Those equity guys don't want to own Burger King or Neiman Marcus forever.  They want to make money for their clients and, more importantly, for themselves.  So what are they going to do?  They are going to slim these companies down, cut expenses, close marginal units, sell off assets and emerge with a lean money machine.  Which they will then sell to the market by going public.  They are going to provide supply and more supply has a downward pressure on demand which means lower prices for stocks.  Not right off the bat.  In fact, the first offers will do great which will result in more offers until the market becomes glutted and the whole thing collapses.  Well, maybe not a collapse as these are real companies as opposed to dot.coms but the process is still there.  More supply usually results in lower prices.

Probably the larger threat to stocks is the elimination of the current tax code.  In 2001, at the beginning of the biggest stock market decline since the Great Depression, the Congress passed a tax package cutting marginal tax rates, cutting the capital gains tax to 15%, the tax rate on dividends to 15% and eventually eliminating the estate tax.  I don't understand all the parliamentary rules but for some reason the tax cutters didn't have enough votes to make the cuts permanent so they put a ten year life on them.  That life expires in 2011.

2011?  So what?  That is a long time away but already the parties are warring over the future of the tax cuts.  The Republicans are trying to make them permanent and the Dems are, and have been, complaining about these tax breaks for the 'wealthy' since the 2004 campaign.  Somehow the strong market that has resulted, record tax receipts, and the fact that 5% of the taxpayers (the wealthy) pay 55% of the taxes in this country seems to have been ignored.  But forget about all that.

A debate over the real or perceived inequities of the tax code is not worth having.  Let's just deal with the facts and the major fact is that the tax changes expire.  They don't come up for a vote, they don't automatically get renewed, they just expire.  Wake up on January 1, 2011 and your taxes went up.  And they will go up on you because the odds are that you will be wealthier on January 1, 2011 than you are now.

But, again, forget the debate and look at the impact on the market.  Increase the cost of an item and that item becomes less valuable.  Taxes are a cost so if you increase the cost of a stock that stock, by definition, becomes less valuable.  To reflect that loss of value, the price of the stock will go down.  Finance is simple.

What are the odds of this happening?  I don't know.  I heard from one source that the parties might cut a deal over the AMT.  Hmmm.  That would be interesting. 

I tend to think this one is not going to turn out well.  While finance is simple, most politicians are lawyers and you know what lawyers can do with simple things.

   

Presidential Terms, Short Skirts and Super Bowl Winners

Many analysts try to find correlations between outside events and stock market results.  There are theories on the length of women's skirts and whether the AFC or the NFC wins the Super Bowl.  Anything to fill up space in the paper.

Here is another which actually has some basis in fact--the third year of any presidential term is the best year for stocks. 

Since 1925 the third year of any presidential term has had only two down years--1931 which was a whopper going down 43.9% followed only by 1939 with a marginal loss of .9%.  EVERY year but those were positive for the stock market.  Let's look back a bit--

2003               Gain of 28.7%

1999                     21%

1995                    37.6%

1991                     30.5%

1987                    5.3%  (I remember this one.  The market got clobbered in October--worse one day loss in history followed by mass panic but still ended the year up.)

1983                   22.6%

1979                    18.6%

1975                   37.2%

1971                   14.3%

1967                  23.9%

That is pretty amazing because there were some really shaky times in there--Vietnam, Watergate, Jimmy Carter.  Makes you shudder.  But the market was up.

Why?  Because Washington shuts down in the third year of a presidential term as everybody gears up for the next race and the resulting inability to get anything done.  This is not to say there is not a lot of noise--look at George going to veto the Iraq spending bill, Harry Reid showing a singular lack of leadership and Alberto Gonzales doing, well, I'm not real sure what he is doing.  But as far as meaningful legislation being passed, forget it.  These guys can't even get a minimum wage hike passed. 

The market loves it.  The market loves political gridlock because they know what will change, at least in the short run.  Nothing.  Stability of sorts because there is not going to be a tax cut or increase, no environmental tampering, no Sarbanes Oxley, probably no minimum wage increase though the market could care less about that.  Nothing, nothing, nothing. 

When the market has less to worry about and most other news is good, the market goes up.  Mr. Market is a happy guy right now and he is enjoying the relative peace on the political front.  He will probably also like year four as well.  In the period from 1925 till now the market has gone down only three times in the fourth year.

A bright reader might ask, What is the worst year in a presidential term for stocks?  Not hard to figure out.  THE FIRST YEAR.  The market has gone down in ten of the 21 years that represent the first year of a president.  Why?  The heathens are all pumped up ready to change the world and attack Washington.  And they usually screw things up which the market doesn't like.  This impact starts to wane in the second year but the second year of a term is also bad with the market going down in eight of the 21 years.

But for now, let's look on the bright side.  We are in the third year and, so far, things are pretty good.

But I do see some clouds on the horizon. 

    

The Incredible Shrinking Stock Market

Supply and demand.  As we have noted, when supply decreases, demand increases.  Increasing demand means, in most cases, higher prices.  And vice versa.  Build too many houses and you have a housing 'crash.'  Take stocks off the table and the prices of the remaining stocks goes up.  Do the reverse and stocks go down.

And they did the other day.  An interesting thing about finance theory is that it is one 'science' where theory pretty much matches reality.  Not all the time but enough.  One of the biggest shocks I had coming out of business school was that business actually used some of the tools taught in school.

So here is the real life example of stocks doing what theory says they should do.  On Monday, I think, airline stocks as a group went down about 1% plus.  American, Northwest, Southwest, anybody that is left, went down.  Why?  Because Delta is almost out of bankruptcy which means there will be more shares of airline stocks in the market.  More shares means existing shares get 'diluted', another finance term taught in business school. 

But in general the reverse is going on.  Shares are disappearing from the market.  Disappearing shares bode well for the shares that still appear and the price should, and has, been going up.  Why are they disappearing?  The answers are--

1) Share Repurchases.  Companies realize that they can borrow after tax money for 3% plus and buy their undervalued shares thus making their remaining shares go up in value.  It also means that management may save their jobs by getting the stock price up.  Never underestimate a management group that is threatened with losing their jobs.  As Samuel Johnson wrote, Nothing concentrates like a hanging.

How much share repurchasing is going on?  Well, just happen to have the number here somewhere.  Let's see.  In 2003 share repurchases totaled $180 billion.  In 2006, share repurchases totaled $670 billion.  Of course, shares were cheaper in 2003 but that is still a lot of shares being taken off the table.

2)  Global mergers are back.  In 2000, there were $790 billion in global mergers.  In 2006, there were $850 billion.  No big deal.  But mergers in 2000 were huge and stupid--this was the dot.com time frame.  So compare today not to 2000 but to 2003 when mergers totaled only $200 billion.  And now mergers are real--companies buying real assets and not sock puppets--and the shares are disappearing making remaining shares more valuable.

3) These are cash mergers, not stock mergers.  In the old days, the mergers were stock deals.  Let's swap my shares for your shares creating just a bunch more shares.  Now deals are for cash.  Why?  Cash is cheap.  Borrow at 3% plus to buy a company with a PE of 15.  A PE of 15 results in an earnings yield of 6.7% (1 divided by PE of 15 results in an earnings yield of 6.7%).  Contrary to what most people think, corporate executives can add, subtract, multiply and divide and it doesn't take a Phi Beta Kappa to figure out that a cost of 3% that results in a return of 6.7% is a good deal.

So that is why stocks are disappearing and making the remaining stocks more valuable. 

Tomorrow--why politics are good for stocks.  And then some clouds on the horizon. 

Financial Myths You Read About In The Wall Street Journal

I love the WSJ but they gotta print a lot of stuff and a lot of stuff in there and in other business publications is myth.

No. 1-Energy Prices Impact Stocks

In 2006 when oil prices jumped around the S&P 500 was up 70 days the day after oil prices went up.  It was also down 60 days after oil prices went up.  When oil prices went down, the market the next day  was up 70 days out of the year.  When oil prices went down, the S&P 500 was down 51 days out of the year.  Not a long test but if you bet on stocks going up because oil prices went up or vice versa you would not become a short term trading wizard. 

No. 2-The US Consumer Is Tapped Out

We talked about this but the net worth of the US consumer is up 48% since 2003.  It is up 44% if you strip out house appreciation.

No. 3-The Real Estate Market Is Bursting

The current median price of a home was $215,000 in January.  The high was $230,000 in July of 2006.  Down a bit but not a collapse.

No. 4-A Weak Dollar Is Bad For Stocks

There is no proven correlation.  Not one that my gurus could find anyway.

No. 5-Trade Deficits Are Bad For Stocks

Deficits sound bad so they must be bad for stocks.  Germany and Japan have run trade surpluses since the 1980.  The US and UK have run trade deficits.  The German and Japanese stock markets are down, the UK and US are up.

No. 6-Budget Deficits Are Bad For Stocks

In years following increases in the Federal budget deficits the first year increase in the stock markets averages 21.6%, two years cumulative 29.7% and three year cumulative 35.1%.

The market one year after a surplus has been down 1.8%, up only 4.2% for the cumulative two years and up only 10.3% after three years.

No. 7-The Economy Is Having A Soft/Hard Landing

Comparing what economists and financial advisors predicted for corporate earnings and what happened is revealing.

In 2004 the estimated EPS growth for the S&P 500 was 13%.  The real number was 20%.

In 2005, the estimate was 11%, the real number 14%.  12% in 2006, real number 15%.  The estimate this year is only for 9% so some room for growth.

N0. 8-China and India Are Taking Over The World

They're growing but so are we so if you want to cash in, diversify your portfolio.

There are all kinds of arguments and you can debate until the cows come home.  The purpose is to not believe everything you read in the papers.

If You Agree With A Contrarian Are You Then Both Conformists?

Not sure what that means but it is a thought that goes through my head when I attend semi-annual seminars put on by a specific financial adviser.  The fact that I agree with 99% of the stuff his group puts out makes me question his, and my, contrarian credentials.

But they are calling for a pretty strong market this year and here are the highlights. 

First, why not?  Financial collapses come about for the following reasons-

Monetary Policy Error

Fiscal Policy Error

Geopolitical Instability

Trade Policy Errors

Increases in Regulations

Euphoric Sentiment

Hmmm...Don't see much of a problem there.  Geopolitical instability, you might say but the market looks and doesn't see much to worry about.  Euphoric sentiment--not like the late 90's and the dot.com mess.  People are still pretty cautious.  Congress basically can't get anything done so no trade or regulatory action and the new Fed chief, after a few stumbles, seems to be doing pretty good.  So no current recipe for a bear market.

Another factor damping down any euphoric sentiment is the FACT that people think the market is riskier than bonds.  So do I.  It is part of our DNA.  Every time the market goes up I want to grab the money and stash it under the mattress.  But if I did that I would be broke so I 'climb the wall of worry' and invest.  Not all but a pretty good percentage because being OUT of the market is riskier than being in bonds.  Mentioned this the other day but bears repeating as bonds since 1926 have returned 1.4% annually after taxes and inflation.  The S&P 500, with the same assumptions, has returned 6.2%.  Now, here is one place I have to worry more than you do because if you are just starting out and contributing to to a 401k you can ride out any ups and downs because you have 40 years to go.  I have to start thinking about timing the market, you don't.

The next topic was mythology--the myths that investors 'believe' impact stock prices.

The top ten myths are

-Energy prices impact stocks

-The US consumer is tapped out

-The real estate market is bursting

-A weak dollar is bad for stocks

-Trade deficits are bad

-Budget deficits are bad for stocks

-The economy is head for a hard landing

-China and India are taking over the world

Actually that is only eight but ten sounds better and we will look at these tomorrow.

Sacre' Bleu-France Does Something Right

France gets 80% of its electricity from nuclear power.

That about knocked me over.  The French, not resilient to change, decided as a result of the Arab oil embargoes of the 70's and 80's not be held hostage to foreign oil, or at least not completely hostage, and entered into a pretty aggressive nuclear power plant construction program. 

Over here, we got Three Mile Island (which was a scare but didn't hurt or kill anyone) and a pretty bad movie called "The China Syndrome" with Michael Douglas, Jack Lemmon and Jane Fonda which didn't kill anybody but scared the hell out of everybody and suddenly, no nuclear power plants for us.  (Never been a big Jane Fonda fan though she was good in "They Shoot Horse, Don't They?" and "Klute" if you like really depressing movies.  Like her brother and her dad.)

The Russians got Chernobyl but I think the French figured they could run a power plant better than the Russians so went ahead with their program. 

So there you go.  We haven't built a nuclear power plant in 30 years and the French are sitting there chugging along without an accident or incident and well on their way to energy independence.  Who woulda thought it?

So what do we do?  In the same seminar where I learned France gets 80% of their electricity from nuclear power I also learned the planning and construction of a nuclear power plant in the US is thirty years  assuming no one demonstrates and tries to close the thing down.  Guess we better get cracking.

Or come up with an alternative which I haven't seen much of.  With everybody moaning about global warming I don't see a lot of people putting forth new ideas for reducing green house gases.  The old 'turn down the thermostat' and 'put in more insulation' gets pretty old after awhile.  I think we need to be more French.

For me, I am doing my part.  Our new house will have solar water heaters.  Well, it will once I figure out how to make them.

Vive la France.

Tax Fraud Q&A

Love getting comments, most of the time.  Here are some to Tax Fraud.  My comments are in bold.

When I was in the UK

I had the option to opt out of the state pension, and put the money I was putting into Social Security into my own pension. I jumped on it. You can't rely on the goverment for your retirement. By the way Bill, why is our resident financial expert doing his taxes the day before the deadline?!!

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Wish we had that option here but maybe not--I'd get trampled by the others heading for the exit.  Actually was doing taxes on the tax deadline as I owed a fair amount due to selling two properties.  Figured out in 2006 that I wasn't going to get a penalty because I met some test the IRS has so applied basic cash management techniques and held on to the cash as long as possible.

Andrea Dickson | 20 hours ago

Totally disagree

I don't think that Bush's attempt at privatizing social security was anything close to a viable solution. Something needs to be done, no doubt about it. But I'd much rather be taxed higher for Social Security and know that we have a good social safety net for our seniors, and for us, when we retire.

Doesn't a Ponzi scheme mean that the current payees make unreasonably high returns? I don't think that that has ever been the case for Social Security. It isn't merely the "pay in now, get it later" aspect, is it?

Actually it was a viable attempt since it continued workers paying into the SS system to take care of the people in their 40's and 50's but allowed a small percentage to go into a private account owned by the worker.  As the old geezers died off, the percentage going into the private account would increase. 

Actually, the SS system is a Ponzi scheme as the current recepients are getting a lot more than they paid in, even inflation adjusted since benefits are inflation adjusted.  Not enough to live on but that is why the full title is SS Supplemental Income. 

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Paul Michael | 16 hours ago

I think that's the problem

The taxes would have to be substantially higher to make a dent in the Social Security problem. And who's to say the government won't keep using it as their own personal piggy bank anyway? I agree that Bush's plan was not viable, but paying more into a corrupt system will not guarantee a future for anyone. At the end of the day, we only have ourselves to bank on (pun intended)

Great point but I think the plan was viable but buried under the guise of 'privatization.'

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Andrea Dickson | 16 hours ago

I would pay more

Call me a great big ol' Commie, but I would pay more taxes to ensure that I would have a secured future. And I wouldn't mind if we spent less on defense. You know, if the countries that we have bases in (like Germany and Japan) started putting their own GDP towards their defense.

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Actually we were spending a lot less on defense in the 90's which was a result of the Peace Dividend due to the fall of communism.  The military basically got gutted.  Agree with the Japan and Germany comment.

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Paul Michael | 15 hours ago

If I could be assured

that the money I was paying in would come back to me in my future, then sure! But it's not a perfect world. We live in a military-industrial complex and war is very profitable to those in power. Even if we do pull out or Iraq soon, something tells me Iran is in the crosshairs. Too many people are making too much money to ever stop the wars. Some people say one of the reasons Kennedy was killed was his support for a full military withdrawal from Vietnam. 

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Hate to be cold blooded here but the nuclear facilities in Iran would probably be taken out by B1s, B2s and B52s. 

Not sure about Kennedy.  Having lived through (as a mere lad) the Bay of Pigs, the Cuban missile crisis and the sending of 'advisors' to Viet Nam, John Kennedy was pretty much an avid anti-communist.  Plus I gave up on the conspiracy theory a long time ago when Dan Rather said something smart--nobody can keep a secret like that a secret for over forty years.

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Andrea Dickson | 15 hours ago

Here's my worry

OK, so I get that the whole "what you pay now goes to someone else" thing - but what happens if we stop paying into Social Security? What about people who are 45 years old now? They've been paying in for the past 25-odd years, and they won't get squat.

Eek. Don't get me going on Iran. Even if our country tries something like that, it doesn't mean that we can't cut back in other areas of defense.

See the part about the 45 year olds above.  Actually I like the Singapore plan--pay in 20% of your salary into your account, invest in stocks and bonds and retire rich.  But you can't spit on the sidewalk.

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kencomer | 7 hours ago

Social Security is not a Financial Firm

First off, let's get one thing straight: saving for your own retirement IN ADDITION TO Social Security is a great idea. It's your money, and the average American [aA] household has nothing in the way of savings except the equity value of their home. The aA has a debt of several thousand dollars in credit card debt and is paying more than 10% (or even 20%) in interest on that debt. Save money = Good.

Secondly, without putting money into risk ventures, you cannot make money faster than inflation and international devaluation of the dollar. The George you praise has been a major cause of the latter. I know many retirees who had to go back to work when the blue-chips they owned took a dive or their stock benefits became worthless. The only safe investment is to put your money in a FDIC-insured account in amounts less than $100,000, and that is a guaranteed loss over time in terms of buying power.

Third, that money you are glad your son is getting represents part of an investment in military spending of more than the next 19 countries on the list. I do not want to cut salaries or entitlements in the military, nor do I want them to skimp on the amount of equipment that protects each serviceman. On the other hand, isn't 6+::1 over second place a little excessive? In 2004, the USA spent $466B and the rest of the world spent $500B. With the supplemental funds for a war that George got us into for no discernible reason (to those who actually waste their time reading about this stuff, anyway, unless you want to talk about the illegal and scandalous oil contracts), those numbers are probably far, far out of date. I do not want us to have a military that big. It gives our politicians stupid ideas and gives megacorps outrageous profits and power.

I also want an army prepared for peacekeeping and defense, rather than one that is (seems to be) geared for assaults. It is no question that our troops have been neither equipped nor trained for fourth-generation warfare (e.g., current Iraqi insurgency methods against the USA). Neither a Blackhawk nor laser-guided bomb is useful against a car-bomber who lives in an undistinguished urban apartment and who is not actively opposed by his neighbors.

Some weapons we are still using actively degrade our military efficiency in fighting this sort of action. Bomblet munitions and napalm-like incindiaries leave mangled, scarred victims that, by their very existence, are anti-American propaganda that will only get worse with the passage of time. (A little boy in a hospital with no feet and missing an arm is a tragedy, but an angry young man railing at the injustice and unfairness of his injury cannot be answered no matter how little his injuries were desired by aAs and aA soldiers. The three years of the war have allowed many of the former to become the latter, and the longer the war lasts, the more there will be. In a few more years or months, one of these boys will wear explosives around his body and roll his wheelchair or cart into a crowd of aA soldiers or whatever other sort of "enemy" his rage has supplied. If not him, perhaps his older sister will perpetuate his rage for him. When the enemy cannot be distinguished from those who are your allies or who are neutral, everyone becomes an enemy.)

George's tax efforts and type and amount of our military spending are the greatest dangers to your son's health. The more you think and read, the fewer doubts you will have.

Wow.  Not so fast, one at a time...First off, let's get one thing straight: saving for your own retirement IN ADDITION TO Social Security is a great idea. It's your money, and the average American [aA] household has nothing in the way of savings except the equity value of their home. The aA has a debt of several thousand dollars in credit card debt and is paying more than 10% (or even 20%) in interest on that debt. Save money = Good.

Agree with the sentiment but not the analysis.  Having just been to a financial briefing yesterday I have an interesting statistic courtesy of the Federal Reserve.  Household net worth has gone up 48% since 2002.  And you are saying, Gotcha,  house appreciation.  A little.  Stripping out house appreciation the net worth has gone up 44%.  Let's deal with facts and not assumptions.

Next up..Secondly, without putting money into risk ventures, you cannot make money faster than inflation and international devaluation of the dollar. The George you praise has been a major cause of the latter. I know many retirees who had to go back to work when the blue-chips they owned took a dive or their stock benefits became worthless. The only safe investment is to put your money in a FDIC-insured account in amounts less than $100,000, and that is a guaranteed loss over time in terms of buying power.

What if the FDIC goes under?  There is a lot of risk in life but also a lot of opportunity.  Some more facts--the ten year Treasury bond (safest of the safest but still some risk) has returned on average, after taxes and inflation, 1.6% since 1926.  The S&P 500 has returned, after inflation and taxes, 6.2%.  Risky but it would riskier to be out of the market.

Now to defense spending..Third, that money you are glad your son is getting represents part of an investment in military spending of more than the next 19 countries on the list.   

As noted, it would be nice if more countries stepped up to the plate.

Then...Some weapons we are still using actively degrade our military efficiency in fighting this sort of action. Bomblet munitions and napalm-like incindiaries leave mangled, scarred victims that, by their very existence, are anti-American propaganda that will only get worse with the passage of time. (A little boy in a hospital with no feet and missing an arm is a tragedy, but an angry young man railing at the injustice and unfairness of his injury cannot be answered no matter how little his injuries were desired by aAs and aA soldiers. The three years of the war have allowed many of the former to become the latter, and the longer the war lasts, the more there will be. In a few more years or months, one of these boys will wear explosives around his body and roll his wheelchair or cart into a crowd of aA soldiers or whatever other sort of "enemy" his rage has supplied. If not him, perhaps his older sister will perpetuate his rage for him. When the enemy cannot be distinguished from those who are your allies or who are neutral, everyone becomes an enemy.)

Not a bad argument but suffers for lack of facts.  To my knowledge I haven't seen a lot of napalm or bomblet munitions being used in Iraq.  It is the other way around.  An anecdote-Saddam put rockets and artillery next to schools and hospitals.  How to take them out without killing doctors, nurses, students.  Bomblets and napalm would take them out but what about the doctors and nurses and students?  A smart Air Force sergeant took a 500 pound bomb, took out the explosives, filled it up with concrete and they dropped it right on the emplacements.  No dead doctors, nurses or students.

Ok, you're not buying it but let's try this--suppose we have short term losses to gain long term gains like introducing democracy into a region that has never seen it.  Maybe I'm a dreamer but I'm not the only one.

A suicide bomber wouldn't be a bomber if they had something to live for.  And suicide bombers were around a long time before we got there.

Finally...George's tax efforts and type and amount of our military spending are the greatest dangers to your son's health. The more you think and read, the fewer doubts you will have.

Given the lack of facts in your write-up, I doubt it.   

 

Tax Fraud

Missed blogging yesterday, had to get that tax return in.  Then read this--

The average household pays $21,992 in Federal taxes.  That is a pretty misleading number but we will go with it for simplicity's sake.  The government spends $24,106 per household which means, I guess, we got a deficit.  That can wait for another day.  Where does that money go?

It goes to--

Social Security  $8,301

Defense $4,951

Anti-Poverty Programs $3,550

$2,071 Interest on Federal Debt

$9,07 Federal Employee Benefits

$664 Health Research and Regulation

$627 Veteran's Benefits

I don't know if these numbers are real or made up but call the Heritage Foundation if you have a question. 

Also, don't really want to talk about all those numbers.  I have no problem with the defense numbers especially since it is paying my son's salary and hopefully keeping the planes of the 96th Bomb Squadron in good enough shape to stay in the air. 

The one that bugs me is Social Security and it should bug you more than me.  Take a look at your paycheck and don't be surprised if you pay more in Social Security (labeled as FICA on your paycheck) and Medicare tax than you do in Federal tax.  According to one survey most of you think you have a better chance of going to the moon than getting paid Social Security when you retire.  I think you may be right.

And here is why.  If the guy running Social Security was working for a private company he would soon end up in jail because he is committing fraud.  He (or she) is paying off liabilities with today's revenues.  In other words, retirees are not getting the money they paid in.  They're getting your money.  You pay it in and the government pays it out.  But wait a minute, that's my money you say.  Of course it is but the retirees money got paid out a long time ago so if the government is going to pay them, and they are, they need the money now so they take yours.  In finance and legal circles that is known as a Ponzi scheme and it is illegal. 

But there is a Social Security surplus you say.  You've read about it and it is going to run out sometime in 2040 or so.  Sorry, the 'surplus' you read about is already being spent.  It is being 'loaned' to the Federal government to meet other current needs.  Isn't that illegal or at least unethical?  If a private company did it probably but we're talking the Feds here.  A short history lesson--there used to be a real Social Security surplus.  It was outside the Federal budget.  But it seems Lyndon Johnson was facing a bit of a shortfall because of Vietnam and the Great Society so he 'borrowed' the Social Security surplus and, amazingly enough, balanced his budget.  It's been 'borrowed' ever since. 

But anyway, how are you going to get your Social Security money back?  I don't know.  Either write it off or hope there are a bunch of young workers out there when you retire.  Because remember, your money will be long gone to the old geezers that are collecting now and for the time before you retire. Or vote somebody in that will solve the mess.  George tried and look how far he got.

The best thing to do is write it off and save for yourself.  When it comes to personal finance, finance  truly is personal. 

Texas Women--Texas Born Tough

Just as I was waxing eloquently last week on the charms and beauties and relative good real estate values in Texas I got a shock back to reality from a friend in the form of an email about a neighbor.  'Neighbor' is relative here as five miles in New York is another time zone while five miles away here is practically next door.  Anyway here is what happened just a few minutes from my house.

The email started out Hey!  Just received this from a friend who lives in Willow Crest off of Ranch House Rd.  The way she writes is pretty funny!  WHAT she's writing about is NOT funny! Keep your eyes open ------------  open the photo and you'll see why.

I would add the picture if I could but you don't want to see it because this lady had come across a 97 pound rattlesnake in her back yard and then killed it with a weedeater.  Yes, a 97 pound rattlesnake dispatched with a weedeater.  Here is the story.

This deadly rattle snake was recently found in Willow Park, just west of Fort Worth, Texas. In lieu of a gun, the rattler was killed with a lot of weed whacking string by Robin B, suburban yard diva. A bit of cussing and screaming was involved; as was a little bit of beer and some jumping around.

Unfortunately the snake was slain before it managed to swallow any of Miss B's unbeloved cats.
After scaring her elderly neighbors with the dead amphibian, Miss B skinned the snake, scooped out and deep fried the meat, and is currently tanning the hide in order to make little button-shaped earrings to sell at the next Willow Park craft show.

A reminder that these creatures are actually out there and no matter what you believe, 
sometimes they should get not only prescriptive rights to be there but the full right of way!

9 Feet long, 97 pounds.

Wow, get that woman on Survivor.  Skinned it, fried it and ate it.  Yikes. 

My wife came home that night and we discussed the event.  Actually I was scared enough that such an animal actually roamed the earth, let alone on this continent and within five miles of here.  Then she said, "Robin sure handled that thing."  "Robin who?"  "Robin, you met here at a Christmas party a couple of years ago."  Then I remembered, no Superwoman, actually kind of cute and she killed this thing?

That is one tough Texas woman. 

I have lone held the opinion that in a bar fight, I would rather link up with a Texas woman than a Texas man.  They're tougher.  While Texas men were out chasing Indians or fighting the Civil War or heading up cattle drives, the women were staying at home doing the hard work and chasing off Indians and such.  Such like that snake on steroids.  My hat, if I had one, is off to Robin.  She is Texas tough.